McqMate
These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: General Knowledge (GK) , Union Public Service Commission (UPSC) .
| 101. |
Who is authorized to issue coins in India? |
| A. | Reserve Bank of India |
| B. | Ministry of Finance |
| C. | State Bank of India |
| D. | Indian Overseas Bank |
| Answer» B. Ministry of Finance | |
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Explanation: Coins may be coined at the Mint for issue under the authority of the Central Government, (of such denominations not higher than one hundred rupees), such dimensions and designs, and of such metals or of mixed metals of such composition as the Central Government may. by notification in the official Gazette, determine.) Paper Currency in India consists of notes of various denominations which are issued by the RBI and the Government of India. The one rupee note is issued by the Ministry of Finance and bears the signature of the secretary. All currency notes are legal tender. |
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| 102. |
Reserve Bank of India was nationalized in - |
| A. | 1948 |
| B. | 1947 |
| C. | 1949 |
| D. | 1950 |
| Answer» C. 1949 | |
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Explanation: The Reserve Bank of India was nationalised with effect from 1st January, 1949 on the basis of the Reserve Bank of India (Transfer to Public Ownership) Act, 1948. All shares in the capital of the Bank were deemed transferred to the Central Government on payment of a suitable compensation. The Reserve Bank of India (RBI) is India's central banking institution. |
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| 103. |
Scheduled Banks have to be registered with - |
| A. | SEBI |
| B. | RBI |
| C. | Finance Ministry |
| D. | SBI |
| Answer» B. RBI | |
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Explanation: The scheduled primary (urban) cooperative banks are required to maintain with the Reserve Bank of India an average daily balance, the amount of which should not be lessthan 5 per cent of their net demand and time liabilities in India in terms of Section 42 of the Reserve Bank of India Act, 1934. Nonscheduled (urban) cooperative banks, under the provision of Section 18 of Banking Regulation. Act, 1949 (As Applicable to Cooperative Societies) should maintain a sum equivalent to at least 3 per cent of their total demand and time liabilities in India on clay-to-day basis. |
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| 104. |
The difference between visible exports and visible imports is defined as - |
| A. | Balance of trade |
| B. | Balance of payment |
| C. | Balanced terms of trade |
| D. | Gains from trade |
| Answer» A. Balance of trade | |
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Explanation: The balance of trade (or net exports, sometimes symbolized as NX) is the difference between the monetary value of exports and imports of output in an economy over a certain period. It is the relationship between a nation's imports and exports. |
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| 105. |
A commercial bank law creates credit only if it has - |
| A. | Cash in the vault |
| B. | Excess reserves |
| C. | Permission of Reserve Bank of India |
| D. | (4) Cooperation of other banks |
| Answer» A. Cash in the vault | |
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Explanation: A commercial bank is a profit- seeking business, dealing in money and credit. It is a financial institution dealing in money in the sense that it accepts deposits of money from the public to keep them in its custody for safety. So also, it deals in credit, i.e., it creates credit by making advances out of the funds received as the deposits to needy people. So it creates credit from the cash deposits with it. |
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| 106. |
"Dear Money" means - |
| A. | low rate of interest |
| B. | high rate of interest |
| C. | depression |
| D. | inflation |
| Answer» B. high rate of interest | |
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Explanation: Dear Money, also known as tight money, is money which has to be borrowed at ahigh interest rate, and so restricts expenditure by companies. This situation can be a result of a restricted money supply, causing interest rates to be pushed up due to the forces of supply and demand. Businesses may have a tough time raising capital during a period of dear money. |
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| 107. |
Commercial banks create credit - |
| A. | on the basis of their securities |
| B. | on the basis of their assets |
| C. | on the basis of their reserve fund |
| D. | on the basis of their deposits |
| Answer» D. on the basis of their deposits | |
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Explanation: Commercial banks create credit on the basis of their deposits. Credit creation is the multiple expansions of banks demand deposits. Whenever, customer deposits sum of money, a part of that money is kept by the commercial banks with the credit bank of the country which is obligatory by the law. The amount of credit that can be created by the bank will depend on the primary deposits and also on the amounts of minimum legal resource requirement. |
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| 108. |
Bank money refers to - |
| A. | currency notes |
| B. | coins |
| C. | gold bullions |
| D. | cheques |
| Answer» D. cheques | |
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Explanation: There are two types of money in a fractional-reserve banking system, currency originally issued by the central bank, and hank deposits at commercial banks: (1) central bank money (all money created by the central bank regardless of its form, e.g. banknotes, coins, electronic money): and (2) commercial bank money (money created in the banking system through borrowing and lending) - sometimes referred to as chequebook money. |
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| 109. |
A financial instrument is called a 'primary security' if ii represents the liability of : |
| A. | some ultimate borrower |
| B. | the Government of India |
| C. | a primary cooperative bank |
| D. | a commercial bank |
| Answer» A. some ultimate borrower | |
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Explanation: Instruments (certificates) issued by the ultimate borrower are called primary securities. Instruments issued by intermediaries on behalf of the ultimate borrower are called indirect securities. The market for instruments (also called securities) issued for the first time, is called the primary market. Primary security is the asset created out of the credit facility extended to the borrower and / or which are directly associated with the business / project of the borrower for which the credit facility has been extended. |
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| 110. |
founded in the year 1886 by a pharmacist named John Pemberton, this product is the second most widely understood term in the world after "OK". What is its name? |
| A. | Aspirin |
| B. | ENO |
| C. | CocaCola |
| D. | Pepsi |
| Answer» C. CocaCola | |
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Explanation: Coca-Cola is the second most widely understood term in the world after "Ok". It was originally intended as a patent medicine when it was invented in the late 19th century by John Pemberton. Coca Cola is the world's largest soft drinks company. It is rated as the most recognized trade mark and third most valuable brand in the world. |
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| 111. |
Which of the following is done at a Stock Exchange? |
| A. | Commodities are bought and sold at wholesale price |
| B. | Commodities are bought and sold at retail price |
| C. | Securities are bought and sold |
| D. | None of these |
| Answer» C. Securities are bought and sold | |
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Explanation: A stock exchange or bourse is an exchange where stock brokers and traders can buy and/or sell stocks (also called shares), bonds, and other securities. Stock exchanges may also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and dividends. |
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| 112. |
Indirect tax means : |
| A. | there is not direct relationship between the tax payer and the government. |
| B. | direct relationship between tax payer and the government. |
| C. | tax base is income |
| D. | the incidence and impact are on the same person on whom tax is imposed. |
| Answer» A. there is not direct relationship between the tax payer and the government. | |
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Explanation: The term indirect tax has more than one meaning. In the colloquial sense, an indirect tax (such as sales tax, a specific tax, value added tax (VAT), or goods and services tax (GST)) is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the consumer). The intermediary later files a tax return and forwards the tax proceeds to government with the return. In this sense, the term indirect tax is contrasted with a direct tax which is collected directly by government from the persons (legal or natural) on which it is imposed. |
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| 113. |
A short-term government security paper is called - |
| A. | Share |
| B. | Debenture |
| C. | Mutual fund |
| D. | Treasury bill |
| Answer» D. Treasury bill | |
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Explanation: Treasury bills are instrument of short-term borrowing by the Government of India, issued as promissory notes under discount. The interest received on them is the discount which is the difference between the price at which they are issued and their redemption value. They have assured yield and negligible risk of default. |
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| 114. |
The existence of a parallel economy or Black Money - |
| A. | makes the economy more competitive |
| B. | makes the monetary policies less effective |
| C. | ensures a better distribution of income and wealth |
| D. | ensures increasing productive investment |
| Answer» B. makes the monetary policies less effective | |
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Explanation: The existence of black money is injurious not just for tax revenues. It distorts the systematic resource allocation process and upsets the accuracy of economic forecasts. Inflation is both a cause as well as a consequence of the black money in our economy. Black money results in the social injustice and fallacy in the economy. The rich gets richer and the poor gets poorer. So the existence of black money erodes the very rationale of growth behind monetary policies. |
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| 115. |
he non-expenditure costs which arise when the producing firm itself owns and supplies certain factors of production are - |
| A. | Explicit costs |
| B. | Original costs |
| C. | Implicit costs |
| D. | Replacement costs |
| Answer» C. Implicit costs | |
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Explanation: In economics, an implicit is the opportunity cost equal to what a firm must give up in order to use factors which it neither purchases nor hires. It is the opposite of an explicit cost, which is borne directly. In other words, an implicit cost is any cost that results from using an asset instead of renting, selling or lending it. These are costs a business incurs without actually spending money. |
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| 116. |
Which of the following subjects does not figure in the Concurrent List of our Constitution? |
| A. | Stock Exchanges and futures markets |
| B. | Protection of wild animals and birds |
| C. | Forests |
| D. | Trade unions |
| Answer» A. Stock Exchanges and futures markets | |
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Explanation: The Concurrent List or List-Ill is a list of 47 items given in Part XI of the Constitution of India, concerned with relations between the Union and States. Stock exchanges and futures markets come under the Union List. |
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| 117. |
The method of calculating the national income by the product method is otherwise known as : |
| A. | Income method |
| B. | Value added method |
| C. | Expenditure method |
| D. | Net output method |
| Answer» D. Net output method | |
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Explanation: Primarily there are three methods of measuring national income. Which method is to be employed depends on the availability of data and purpose. The methods are product method, income method and expenditure method. According to product method, the total value of final goods and services produced in a country during a year is calculated at market prices. According to this method only the final goods and services are included and the intermediary goods and services are not taken into account. In this method, National Output = National Expenditure (Aggregate Demand) = National Income. |
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| 118. |
The best measure to assess a country's economic growth is - |
| A. | per capita income at constant prices |
| B. | per capita income at current prices , |
| C. | gross domestic product at current prices |
| D. | gross national product at current prices |
| Answer» A. per capita income at constant prices | |
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Explanation: Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a given period of time. Per capita income or average income or income per person is the mean income within an economic aggregate, such as a country or city. It is calculated by taking a measure of all sources of income in the aggregate (such as GDP or Gross National Income) and dividing it by the total population. |
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| 119. |
Rate of interest is determined by - |
| A. | The rate of return on the capital invested |
| B. | Central Government |
| C. | Liquidity preference |
| D. | Commercial Banks |
| Answer» D. Commercial Banks | |
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Explanation: Bank Rate is determined by the Reserve Bank of India. The rate of interest is determined by the commercial banks in India. As per RBI notification, banks are free todetermine rates of interest subject to BPLR and spread guidelines. |
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| 120. |
The total value of goods and services produced in a country during a given period is - |
| A. | Disposable income |
| B. | National income |
| C. | Per capita income |
| D. | Net national income |
| Answer» B. National income | |
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Explanation: National income is the total value a country's final output of all new goods and services produced in one year. Understanding how national income is created is the starting point for macroeconomics. |
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| 121. |
Income and consumption are : |
| A. | inversely related |
| B. | directly related |
| C. | partially related |
| D. | unrelated. |
| Answer» B. directly related | |
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Explanation: Consumption and income arc directly or positively related. An increase in income is associated with an increase in income; a decrease in consumption accompanies a decrease in income. |
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| 122. |
Which of the following is deducted from GNP to arrive at NNP? |
| A. | Depreciation |
| B. | Interest |
| C. | Tax |
| D. | Subsidy |
| Answer» A. Depreciation | |
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Explanation: If we subtract the depreciation charges from the gross national product, we get net national product at market price. Net national product at market price=Gross national product at market priceDepreciation. |
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| 123. |
Regarding money supply situation in India it can be said that the : |
| A. | Currency with the public is inconvertible only. |
| B. | Currency with the public is less than the deposits with the banks. |
| C. | Currency with the public is more than the deposits with the banks. |
| D. | Currency with the public is almost equal to the deposits with banks. |
| Answer» B. Currency with the public is less than the deposits with the banks. | |
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Explanation: Money supply in India includes the following: (i) Currency with the public: (ii) Demand deposits and time deposits with banks: (iii) Deposits with reserve Bank of India: and (iv) Deposits in Post Office. The currency with public is less than the total currency issued by RBI. This is because of cash reserves with banks, i.e., a part of currency issued remains with banks. As far as deposits are concerned, during the last four decades, the proportion of demand deposits, time deposits and other with banks in relation to total supply of money has been increasing with reciprocal diminution in currency held by the public. |
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| 124. |
The equilibrium price of a commodity will definitely rise if there is a/an: |
| A. | increase in supply combined with a decrease in demand. |
| B. | increase in both demand and supply. |
| C. | decrease in both demand and supply. |
| D. | increase in demand accompanied by a decrease in supply. |
| Answer» D. increase in demand accompanied by a decrease in supply. | |
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Explanation: Price of a commodity is always determined by the forces of demand and supply in the market. The price at which the amount demanded and amount supplied are equal is known as 'equilibrium price.' The equilibrium price definitely increases when there is an in- crease in demand combined with the decrease in supply. |
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| 125. |
Short term contractions and expansions in economic activity are called |
| A. | Expansions |
| B. | Recession |
| C. | Deficits |
| D. | The business cycle |
| Answer» D. The business cycle | |
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Explanation: The business cycle is the fluctuation in economic activity that an economy experiences over a period of time. It is basicallydefined in terms of periods of expansion or recession. During expansions, the economy grows in real terms (i.e. excluding inflation), as evidenced by increases in indicators like employment, industrial production, sales and personal incomes. During recessions, the economy contracts, as measured by decreases in the above indicators. |
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| 126. |
The concept of joint sector implies cooperation between - |
| A. | Public sector and private sector industries |
| B. | State Government and Central Government |
| C. | Domestic and. Foreign Companies |
| D. | None of these |
| Answer» A. Public sector and private sector industries | |
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Explanation: Joint sector industries are owned jointly by the government and private individuals who have contributed to the capital. In joint sector, both public sector and private sector join hands to establish new enterprise. The joint sector is an extension of the concept of mixed economy. |
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| 127. |
When there is a change in demand leading to a shift of the Demand Curve to the right, at the same price as before, the quantity demanded will - |
| A. | decrease |
| B. | increase |
| C. | remain the same |
| D. | contract |
| Answer» B. increase | |
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Explanation: In economics, the demand curve is the graph depicting the relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at that given price. The shift of a demand curve takes place when there is a change in any non-price determinant of demand, resulting in a new demand curve. There is movement along a demand curve when a change in price causes the quantity demanded to change. |
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| 128. |
The income elasticity of demand being greater than one, the commodity must be - |
| A. | a necessity |
| B. | a luxury |
| C. | an inferior good |
| D. | None of these |
| Answer» B. a luxury | |
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Explanation: In economics, income elasticity of demand measures the responsiveness of the demand for a good to a change in the income of the people demanding the good, ceteris paribus. It is calculated as the ratio of the percentage change in demand to the percentage change in income. For example, if, in response to a 10% increase in income, the demand for a good increased by 20%. the income elasticity of demand would be 20%/10% = 2. A positive income elasticity of demand is associated with normal goods: an increase in income will lead to a rise in demand. If income elasticity of demand of a commodity is less than 1, it is a necessity good. If the elasticity of demand is greater than 1, it is a luxury good or a superior good. |
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| 129. |
The main determinant of real wage is - |
| A. | extra earning |
| B. | nature of work |
| C. | promotion prospect |
| D. | purchasing power money |
| Answer» D. purchasing power money | |
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Explanation: The term real wages refers to wages that have been adjusted for inflation. This term is used in contrast to nominal wages or unadjusted wages. Real wages provide a clearer representation of an individual's wages. The real purchasing power of income or money is the key determinant of real wage. It an indication of an individual's actual purchasing power. Real wages arc a useful economic measure, as opposed to nominal wages, which simply show the monetary value of wages in that year. |
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| 130. |
A refrigerator operating in a chemist's shop is an example of - |
| A. | free good |
| B. | final good |
| C. | producers good |
| D. | consumer's good |
| Answer» B. final good | |
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Explanation: Final goods are goods that are ultimately consumed rather than used in the production of another good. For example, a car sold to a consumer is a final good; the components such as tires sold to the carmanufacturer are not; they are intermediate goods used to make the final good. |
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| 131. |
The situation in which total revenue is equal to total cost, is known as - |
| A. | monopolistic competition |
| B. | equilibrium level of output |
| C. | break-even point |
| D. | perfect competition |
| Answer» C. break-even point | |
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Explanation: In economics and cost accounting, the break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or a loss has not been made, although opportunity costs have been "paid", and capital has received the risk- adjusted, expected return. |
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| 132. |
The relationship between price of a commodity and the demand for it - |
| A. | is a positive relationship |
| B. | is an inverse relationship |
| C. | They are independent of each other |
| D. | They do not have any relationship |
| Answer» B. is an inverse relationship | |
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Explanation: According to the Law of demand, consumers buy more of a good when its price is lower and less when its price is higher. It states that the quantity demanded and the prices of a commodity are inversely related, other things remaining constant. |
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| 133. |
Consumer's sovereignty means: |
| A. | consumers are free to spend their income as they like. |
| B. | consumers have the power to manage the economy. |
| C. | consumer's expenditures influence the allocation of resources. |
| D. | consumer goods are free from government control, |
| Answer» A. consumers are free to spend their income as they like. | |
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Explanation: Consumer sovereignty means that buyers ultimately determine which goods and services remain in production. In unrestricted markets, those with income orwealth are able to use their purchasing power to motivate producers. So ultimately it means how the consumers want to spend their incomes. |
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| 134. |
The situation in which total Revenues equals total cost, is known as : |
| A. | Monopolistic competition |
| B. | Equilibrium level of output. |
| C. | Break even point |
| D. | Perfect competition |
| Answer» C. Break even point | |
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Explanation: In economics and cost accounting, the break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even." |
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| 135. |
A market in which there are a few number of large firms is called as |
| A. | Duopoly |
| B. | Competition |
| C. | Oligopoly |
| D. | Monopoly |
| Answer» C. Oligopoly | |
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Explanation: Duopoly means a market in which two producers of the same good are predominantly powerful. In some theries, the term is used specifically to denote the existence of only two suppliers of a good. |
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| 136. |
Number of sellers in the monopoly market structure is - |
| A. | few |
| B. | large |
| C. | one |
| D. | two |
| Answer» C. one | |
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Explanation: Monopoly refers to a market in which there is only one supplier and no other firms are able to enter. |
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| 137. |
When percentage change in demand for a commodity is less than percentage change in its price, then demand is said to be - |
| A. | Highly elastic |
| B. | Inelastic |
| C. | Relatively elastic |
| D. | Perfectly inelastic |
| Answer» B. Inelastic | |
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Explanation: When the percentage change in quantity demanded is less than the percentage change in price, then the demand for the commodity is said to be inelastic. Price elasticity of demand refers to the degree of responsiveness of quantity demanded to change in price. |
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| 138. |
Production function is the relationship between - |
| A. | Production and Profit |
| B. | Production and Prices |
| C. | Production and Production factors |
| D. | Production and Income |
| Answer» C. Production and Production factors | |
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Explanation: In economics, a production function relates physical output of a production process to physical inputs or factors of production. The primary purpose of the production function is to address allocative efficiency in the use of factor inputs in production and the resulting distribution of income to those factors. |
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| 139. |
Any factor of production can earn economic-rent, when its supply will be - |
| A. | Perfectly elastic |
| B. | Perfectly inelastic |
| C. | Elastic in nature |
| D. | All of the above |
| Answer» B. Perfectly inelastic | |
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Explanation: Economic rent is the revenue that can be earned from the land or other natural resource for which there is a fixed supply — as economists like to say, the supply is perfectly inelastic. Because the supply is perfectly inelastic, the amount of its supply does not depend on any income that the resource can produce. |
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| 140. |
The father of Economics is - |
| A. | Marshall |
| B. | Adam Smith |
| C. | J.M. Keynes |
| D. | Karl Marx |
| Answer» B. Adam Smith | |
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Explanation: Adam Smith is known as 'Father of Modern Economics,' He is best known for two classic works: The Theory of Moral Sentiments (1759), and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). |
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| 141. |
The sale of branded articles is common in a situation of - |
| A. | excess capacity |
| B. | monopolistic competition |
| C. | monopoly |
| D. | pure competition |
| Answer» B. monopolistic competition | |
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Explanation: Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another (e.g. by branding or quality) and hence are not perfect substitutes. Textbook examples of industries with market structures similar to monopolistic competition include restaurants, cereal, clothing, shoes, and service industries in large cities. |
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| 142. |
Who propounded Dynamic Theory of profit? |
| A. | Clark |
| B. | Schumpeter |
| C. | Knight |
| D. | Hawly |
| Answer» A. Clark | |
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Explanation: Dynamic Theory of Profit is associated with the name of an American Economist J. B. Clark. In the world of reality, according to J. B. Clark profit arises only in a dynamic economy. |
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| 143. |
Demand curve of a firm under perfect competition is : |
| A. | horizontal to ox-axis |
| B. | negatively sloped |
| C. | positively sloped |
| D. | U - shaped |
| Answer» A. horizontal to ox-axis | |
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Explanation: Under Perfect Competition, the firm faces a horizontal demand curve. It can sell any quantity desired at the market price, but cannot sell anything above the market price. |
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| 144. |
The marginal revenue of a monopolist is: |
| A. | more than price |
| B. | equal to price |
| C. | less than price |
| D. | less than marginal cost |
| Answer» C. less than price | |
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Explanation: A monopolist's marginal revenue is always less than or equal to the price of the good. Marginal revenue is the amount of revenue the firm receives for each additional unit of output. It is the difference between total revenue - price times quantity - at the new level of output and total revenue at the previous output (one unit less). |
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| 145. |
Payment of water charges by the farmers to the government represents - |
| A. | intermediate consumption |
| B. | final consumption |
| C. | fixed investment |
| D. | inventory investment |
| Answer» A. intermediate consumption | |
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Explanation: Intermediate consumption is an accounting concept which measures the value of the goods and services consumed as inputs by a process of production. It excludes fixed assets whose consumption is recorded as consumption of fixed capital. The goods and services may be either transformed or used up by the production process. Intermediate goods or services used in production can be either changed in form (e.g. bulk sugar) or completely used up (e.g. electric power, water, etc). |
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| 146. |
The problem of Economics arises from |
| A. | Plenty |
| B. | Scarcity of goods |
| C. | More wants and less goods |
| D. | All of the above |
| Answer» C. More wants and less goods | |
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Explanation: The theory of Economic problem states that there is scarcity, or that the finite resources available are insufficient to satisfy all human wants and needs. The problem then becomes how to determine what is to be produced and how the factors of production(such as capital and labor) are to be allocated. In short, the economic problem is the choice one must make, arising out of limited means and unlimited wants. |
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| 147. |
When average cost production (AC) falls, marginal cost of production must be - |
| A. | rising |
| B. | Falling |
| C. | Greater than the average cost |
| D. | Less than the average cost |
| Answer» D. Less than the average cost | |
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Explanation: Average cost is the total cost per unit of output. Marginal cost, on the other hand, is the addition to the total cost by producing one more units of output. Economies of scale are said to exist if an additional unit of output can he produced for less than the average of all previous units—that is, if long-run marginal cost is below long-run average cost, so the latter is falling. Conversely, there may be levels of production where marginal cost is higher than average cost, and average cost is an increasing function of output. |
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| 148. |
Production function expresses - |
| A. | technological relationship between physical inputs and output |
| B. | financial relationship between physical inputs and output |
| C. | relationship between finance and technology |
| D. | relationship between factors of production |
| Answer» A. technological relationship between physical inputs and output | |
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Explanation: Production involves transformation of inputs into outputs. The output is a function of input. The functional relationship between physical inputs and physical output of a firm is called production function. The word 'function' in mathematics means the precise relationship that exists between one dependent variable and a number (or one) of independent variables. The production function states the maximum quantity of output that can be produced from any given quantities of various inputs during a given period of time. |
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| 149. |
When there is one buyer and many sellers then that situation is called - |
| A. | Monopoly |
| B. | Single buyer right |
| C. | Down right |
| D. | Double buyers right |
| Answer» B. Single buyer right | |
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Explanation: In economics, a monopsony (mono: single) is a market form in which only one buyer faces many sellers. It is an example of imperfect competition, similar to a monopoly, in which only one seller faces many buyers. As the only purchaser of a good or service, the monopsonist may dictate terms to its suppliers in the same manner that a monopolist controls the market for its buyers. It is also known as Single buyer Right. A single-payer universal health care system, in which the government is the only "buyer" of health care services, is an example of a monopsony. Another possible monopsony could develop in the exchange between the food industry and farmers. |
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| 150. |
The measure of a worker's real wage is |
| A. | The change in his productivity over a given time |
| B. | His earnings after deduction at source |
| C. | His daily earnings |
| D. | The purchasing power of his earnings |
| Answer» D. The purchasing power of his earnings | |
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Explanation: A real wage rate is a nominal wage rate divided by the price of a good and is a transparent measure of how much of the good an hour of work buys. It provides an important indicator of the living standards of workers, and also of the productivity of workers. While differences in earnings or incomes may be misleading indicators of worker welfare, real wage rates are comparable across time and location. Nominal wages are not sufficient to tell us if workers gain since, even if wages rise, the price of one of the goods also rises when moving to free trade. The real wage represents the purchasing power of wages—that is, the quantity of goods the wages will purchase. |
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